Hotel Development: Boutique vs. Traditional Brand

Boutique hotel supply and demand is growing at a much faster clip than traditional branded hotels. According to the Highland Group 2019 Boutique Hotel Study, demand for boutique hotels grew at a year-over-year rate of more than 8 percent, while overall US hotel demand grew a mere 2 percent in 2018.

A consumer shift as significant as this should be noted if you are considering a hotel development project. Let’s get a few definitions covered. Boutique hotels fall into three major categories: independent, lifestyle and soft brand. An independent hotel is not brand or chain affiliated. Lifestyle would include national brands such as Aloft and Kimpton. Soft branded hotels, such as Autograph by Marriott or Curio by Hilton, are often conversions from independent hotels. Essentially an owner plugs into the brand reservation system and pays a royalty fee for this privilege, generally resulting in the hotel retaining its independent status.

The hotel business is a street corner business—supply and demand fundamentals are key drivers when selecting a property type and size. In suburban or soft urban markets where a hotel is the highest/best use of the land, traditional branded options are often your best option. As barriers increase, markets tighten and average room rates rise, “upper upscale” boutique hotels are more economically viable.

If your feasibility work shows the market supporting a high-end boutique, your next selection is between lifestyle or independent. The level of hotel development experience of you and your team have will drive this decision. The branding, design and operating experience required for an independent is crucial. If you don’t have people on the team who have “seen the movie,” forgo independent and opt for a lifestyle hotel. The national hotel chain has defined the brand and key design elements for you and finding a hotel operator that understands a national lifestyle brand is easier than finding one for a newly branded independent. This option allows you to take advantage of consumer trending toward lifestyle/experiential, while avoiding some development risk.

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- Jon Peck

President of Peck Hotel Consulting.